I remember as a kid, when my father, who ran the printing and copy shop for a major university, told us about the good-will gestures that various vendors made to him. Fortunately, to the best of my knowledge, he turned down all of them. Yet procurement fraud remains a clear and present danger to all companies, non-profits, universities, governmental agencies and departments. It's something that is rarely written about, but that is clearly on the minds of executives. In past lives, I've even been asked if I would contribute something as part of a deal back to a party who helped facilitate a transaction (knowing me, I hope you could guess my response).
Given the scarcity of coverage on the subject, it's invaluable when a publication with the depth and credibility of CPO Agenda tackles the subject, as they did in the recent above-linked article. Most recently in the US, managers at Best Buy, were accused and admitted to conspiring with suppliers in a long-term fraud case. And in the UK, as CPO Agenda suggests, more incidents are coming to light, in part as a result of new anti-fraud legislation focused on foreign bribery and corruption. This includes "bridge-building firm Mabey & Johnson," who "became the first large British company to be convicted of foreign bribery after admitting that it had paid bribes to ministers and officials in Africa, the Caribbean and the Middle East to secure orders."
Others include BAE, which "agreed to pay nearly £300 million in fines in the US and the UK over corruption offences" and "three directors of the French engineering conglomerate Alstom were arrested in an operation by the UK's Serious Fraud Office ... over alleged bribery payments uncovered in an investigation carried out jointly with Swiss authorities." Many other companies and executives are getting caught up in these scandals on a global basis. But how can companies identify whether or not they're likely victims of procurement fraud? The UK's seriously named Serious Fraud Office suggests, according to the article, that "abnormal cash payments, pressure for payments to be made urgently or ahead of schedule, payments being made through a third-party country and abnormally high commission percentages being paid," are all potential markers of fraudulent activity.
In my own experience, there are multiple stages to identifying potential fraudulent activities. The most important first step is to attempt to stamp out fraud in the first place by encouraging transparency in negotiations -- often using an online tool with multiple potential vendors. Cutting into supplier margins reduces the amount of capital at play for potential kickbacks, among other benefits. Following this, it goes without saying that a closed-loop requisitioning, invoicing and payment process can play a key role as well. But the most important element of fraud detection and prevention ultimately comes down to good old-fashioned detective work and example making. In this area, there's no substitute for the ability to drill into spending, payment, vendor and related information -- not to mention working with local authorities to locate other data to determine if potential suspects are leading a lifestyle outside of their expected income bounds.